Ampco-Pittsburgh Corporation. June 28, 2016 Boston East Coast IDEAS Investor Conference

Transcription

1 Ampco-Pittsburgh Corporation June 28, 2016 Boston East Coast IDEAS Investor Conference

2 2 The Private Securities Litigation Reform Act of 1995 (the Act ) provides a safe harbor for forwardlooking statements made by or on our behalf. This information may contain forward-looking statements that reflect our current views with respect to future events and financial performance. All statements in this document other than statements of historical fact are statements that are, or could be, deemed forward-looking statements within the meaning of the Act. In this document, statements regarding future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements. Words such as may, intend, believe, expect, anticipate, estimate, project, forecast and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, are not guarantees of future performance or expectations, and involve risks and uncertainties. For Ampco-Pittsburgh, these risks and uncertainties include, but are not limited to, those described under Item 1A, Risk Factors, of Ampco-Pittsburgh s Annual Report on Form 10-K. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.

3 Agenda Introduction to Ampco-Pittsburgh Forged and Cast Engineered Products (Union Electric Steel) Air and Liquid Processing Strategies to improve Ampco-Pittsburgh s Financial Performance Åkers Acquisition 3

4 Who is Ampco-Pittsburgh Corporation? Ampco-Pittsburgh Corporation manufactures and sells highly engineered, high performance specialty metal products and customized equipment utilized by industry throughout the world. Two segments are reported: 1. Forged and Cast Engineered Products (known as UES) 2. Air and Liquid Processing 4

5 Headquarters Carnegie, PA, U.S. Traded on NYSE. Symbol -- AP 2015 Revenue -- $238.5 M 1,800 employees Ampco-Pittsburgh Today Forged and Cast Engineered Products (66% of sales) A world leader in manufacture of steel rolls (cast and forged) 90+ years of experience 15 sales offices Six manufacturing facilities in U.S. Three roll manufacturing plants in China (joint ventures) Three roll manufacturing plant in Europe In 2015, acquired Alloys Unlimited and Processing (Ohio) Supplier of specialty tool, alloy, and carbon steel round bar Forged and cast product distribution center for quick turnaround requests In 2016 acquired Åkers (Sweden) Air and Liquid Processing (34% of sales) Custom-designed, specialty heat exchangers, air handling systems, and centrifugal pumps Three U.S. manufacturing facilities in Virginia (2 plants) and New York 5

6 Ampco-Pittsburgh Today (cont d) Two Segments reported: 2015 Revenue Forged and Cast Engineered Products (Union Electric Steel) $152.3M Forged and Cast Rolls Open Die Forged Products Air and Liquid Processing $86.2M Aerofin-Heat Exchangers Buffalo Air Handling Custom Air Handling Systems Buffalo Pumps-Specialty Centrifugal Pumps Åkers Revenue* $150.7M 6 * Includes only the businesses acquired by Ampco-Pittsburgh.

7 Union Electric Steel (UES)

8 8 Roll Products

9 9

10 Global Roll Market Cast Rolls Forged Rolls Total $1.4B/yr $0.7B/yr $2.1B/yr U.S. Roll Market $0.3B/yr 10

11 Competing Companies in Roll Industry Cast Rolls Region Company Name Estimated Global Market Share Forged Rolls Region Company Name Estimated Global Market Share EUR Åkers * 5% Coswig <2,5% ESW <2,5% GP <2,5% Innse <2% North America Åkers National Roll * <2% United <2% Whemco <2,5% S-AM Villares <2,5% Asia-Pacific Hitachi <2,5% Nippon Steel <2% China Gong Chang 5% Xingtai 10% EUR Åkers * 3% Sheffield Forgemasters <2,5% Steinhoff <2% Villares <1,5% N. America UES 5% Whemco <2% Superior <1,5% S-AM Villares <2,5% A-PAC Hitachi 2,5% Doosan <2,5% JCFC <2% JSW <1,5% China Xingtai 7% Baosteel 4% 11 *Ampco-Pittsburgh completed acquisition of Åkers in Q

12 UES Diversification Cyclicality of steel and aluminum industries drove decision to strategically diversify the company Manufacturing requirements for open die forge market are perfect match for our manufacturing assets 3-1/2 year history in fracking industry 12

13 Fluid end Diversification through Open Die Forged Engineered Products (FEP) Fracking pump unit Mud Pump Multiple fracking pump units on-site 13

14 14 FEP Products - Bars

15 Additional FEP Potential Products New Target Products Blow-Out Preventers (BOPs) Gears (e.g. pinion gears) Mining bits/steps Mud pump blocks Mud pump crankshafts Quills (on drilling rig) Reamers/stabilizers Shafts Wellhead forgings/valve bodies Wye blocks 15

16 In North America Open Die Sales Market is almost 10X Larger than Roll Market Source: FIA 16

17 17 Air and Liquid Processing Segment (A&LP)

18 Aerofin Products Split-Fit Steam heating coils Copper spiral finned nuclear stamped coil 18

19 Aerofin Serves Four Markets 48.8% 15.2% 20.8% Fossil fuel power generation Industrial Nuclear power generation OEM/Commercial 15.2% Fossil Industrial Nuclear OEM/Commercial 19

20 Buffalo Air Handling Custom Air Handling Systems Rooftop unit at a pharmaceutical manufacturing facility Air handling unit in our manufacturing plant for a medical center in New York 20 Triple stacked units being installed at a research facility in Illinois

21 Buffalo Air Handling Serves Four Markets 29.0% 17.5% 19.0% 34.5% Pharmaceutical Hospital University General Industries Pharmaceutical Hospital University General Industry 21

22 Buffalo Pumps Products Specialized Centrifugal Pumps Seal-less pump 22 Vertical double suction pump for a United States Navy surface vessel Vertical submerged lube oil pump

23 Buffalo Pumps Serves Three Markets 23.6% 10.9% 65.5% Fossil Fuel Military Use Industrial Refrigeration 23

24 Ampco s Financial Performance has Deteriorated in Recent Years Primarily Due to UES Performance Global steel market depressed since 2011 UES s sales, margins, and profits have declined as customers reduce production and costs Air and Liquid Processing profitable, consistent performer, but lacks growth 24

25 Ampco-Pittsburgh Corporation Operating Income ( ) Actual 25

26 Strategies to Improve Ampco Performance 26

27 Union Electric Steel Pre-Åkers Acquisition Strategic Plan Summary Revenue * 27 *Union Electric Steel has historically represented 66% of total revenue of Ampco-Pittsburgh.

28 Strategies to Improve UES Financial Performance: Stabilize and Optimize UES: in progress Reduce costs: completed stage 1, stage 2 in progress Achieve product diversification: initiated, revenue growing Identify and complete strategic acquisitions: in progress Revive R&D (new high performance products): in progress Fill product gaps: complete with Åkers acquisition Develop low cost alternative roll: step 1- complete with Åkers acquisition 28

29 Strategies to Diversify UES Product Portfolio for Growth Utilize flexible manufacturing assets to diversify and offset roll/steel industry cyclicality Optimize market pull into fracking industry and others Capitalize on opportunity to diversify into broader markets beyond fracking Research M&A opportunities Acquired Alloys Unlimited distribution center July

30 Air and Liquid Processing Estimated Organic Growth Revenue * Based on successful implementation of 3-year STRATEGIC PLAN

31 Key Strategies to Improve A&LP Performance Grow revenue (market share) Reduce costs, increase margins Strengthen engineering and manufacturing capabilities Revise sales and marketing approach 31

32 32 Ampco-Pittsburgh Corporation Pre-Åkers Acquisition Revenue ( )

33 Ampco-Pittsburgh Strategy Structure company to make money now Integrate Åkers aggressively. Right size manufacturing capacity for short term Ready capacity to match increased demand when it occurs. Don t sacrifice future for short term gains Lead market with price increases on forged and cast rolls Effective July 1, 2016 (avg. increase 5%) Continue to establish reputation in open-die forged product market 33

34 Cost Reduction Strategy is Underway Initiated $10M corporate-wide cost reduction program in 2015 Centralized overhead functions to increase efficiency Implemented approximately 10% reduction in force (approximately 100 employees) Froze defined benefit pension plan for salaried employees Froze defined benefit pension plan, added contributory health, and reduced number of job classifications at unionized manufacturing plant in Carnegie, PA Relocated corporate headquarters to Carnegie, PA to eliminate $~500K in annual rent and related costs* Integrate Åkers and capture synergies (approx. $15M) Lean manufacturing ongoing 34

35 35 Åkers Acquisition

36 Why Acquire Åkers? Combines the two top competitors in the roll industry, both recognized for product performance, technology, and customer service Manufacturing Adds four roll production facilities, including two low-cost producers Adds cast roll production in U.S. Adds forged roll supply to Europe Adds lower cost product alternative 36

37 Why Acquire Åkers? (cont d) Sales/Marketing Joins complementary product lines (Ampco s strength in forged rolls; Åkers strength in cast rolls) Creates complete product line Fills gaps in UES s product portfolio Increases potential customer base to include all steel and aluminum mills Provides both high-performance, high quality rolls and low-cost rolls Accelerates R&D product launches Added 11 sales offices and complement of sales personnel Transforms Ampco into more of a global competitor Adds sales office in Brazil, Germany, Turkey, Egypt and Singapore Establishes a center of strength in Asia Pacific, the world s largest market for rolls Add service capability in U.S. (Vertical Seal in PA) closer to customer 37

38 Global Footprint - Pre Transaction UES Locations Manufacturing 38 Sales Office

39 Global Footprint Post Transaction 39 UES Locations Manufacturing Sales Office Åkers Locations Manufacturing Sales Office

40 Financial Benefits of Åkers Acquisition Should contribute to stabilizing UES and improving performance of Ampco Revenue from roll business could grow substantially Cost reduction and other synergies estimated to be $15M or greater Synergies estimated to be fully realized in months Estimated cost to realize synergies: $4 to $5M Provides potential currency balance 40

41 Terms of Definitive Agreement to Purchase Åkers AB Purchase price ~$77M $29M cash paid at closing 1.78M shares of Ampco-Pittsburgh stock $26M notes payable March

42 Industry recovery may be beginning Price for steel across the world increased up to 25% in March and April EU trade protection pending Trickle down impact to roll manufacturers Several import tariffs announced in U.S.; More being evaluated U.S. mill utilization beginning to increase; Reported current level is 74% Expect customer roll inventories are low due to cost control and working capital conservation 42

43 Ampco-Pittsburgh Corporation Thank you Questions